Monthly Archives: October 2013

St. Louis Financial Stress Index – October 31, 2013 Update

On March 28, 2011 I wrote a post (“The STLFSI“) about the St. Louis Fed’s Financial Stress Index (STLFSI) which is supposed to measure stress in the financial system.  For reference purposes, the most recent chart is seen below.  This chart was last updated on October 31, incorporating data from December 31,1993 to October 25, 2013, on a weekly basis.  The October 25, 2013 value is -.78:

(click on chart to enlarge image)

STLFSI_10-31-13 -.78

Here is the STLFSI chart from a 1-year perspective:

STLFSI_10-31-13 -.78 1-year

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 31, 2013:

http://research.stlouisfed.org/fred2/series/STLFSI

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I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1764.71 as this post is written

U.S. Dollar Concerns

One of my ongoing concerns is the future strength, or lack thereof, of the U.S. Dollar.  As I am gravely concerned over the future level of the U.S. Dollar and the implications of such, I have written extensively on the subject of the U.S. Dollar and its vulnerability to substantial decline.

In this post I would like to highlight and summarize various fundamental issues concerning the U.S. Dollar.  (For those interested, every month I have been posting long-term U.S. Dollar charts, including notable technical demarcations.)

For reference purposes, here is a monthly chart of the U.S. Dollar Index, on a LOG scale, since 1983 :

(click on chart to enlarge image)(chart courtesy of StockCharts.com)

EconomicGreenfield 10-31-13 USD Monthly LOG

The current and ongoing characteristics of our economic situation are “textbook” (pre)conditions to substantially depreciate a currency.  These (pre)conditions include, but are not limited to:

  • Very low interest rates
  • Truly outsized interventions (including “money printing”);
  • Ongoing large budget deficits and deficit spending “as far as the eye can see.”
  • Substantial federal debt; depending upon specific estimate used, at multiples of GDP when viewed on an accrual basis
  • Many exceedingly large asset bubbles – and future implications
  • An economic system highly vulnerable to financial instability

As I’ve discussed in previous posts, perhaps the main reason for the complacent attitude toward future U.S. Dollar levels is that the U.S. has never experienced substantial economic problems brought on by currency weakness.  It appears as if many people will worry about a significantly lower U.S. Dollar if – and when – it occurs.

There are many problems with this approach.  Based on various fundamental and technical analysis factors, I believe that should the Dollar fall substantially from these levels – as I expect – the decline will prove rather intractable – i.e. once it falls, it will stay lower and “reversing the slide” will prove very difficult.

A substantial Dollar decline will have many ill-effects, and will likely be akin to opening a “Pandora’s Box” of various economic and financial problems.  This currency weakness will create an entirely new set of severe economic problems and challenges, in addition to other problems that will almost certainly coexist at the same time of the Dollar’s decline.

While undoubtedly many people will expect any Dollar decline to be gradual and thus “manageable,” such an expectation will unfortunately prove too optimistic.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1763.31 as this post is written

House Prices Reference Chart

As a reference for long-term house price index trends, below is a chart, updated with the most current data (through August, except for the Case-Shiller National Index, which is through June), from the CalculatedRisk blog post of October 29 titled “Comment on House Prices: Real Prices, Price-to-Rent Ratio, Cities” :

(click on chart to enlarge image)

CR 10-29-13 - HPNominalAug2013

 

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1771.95 as this post is written

Consumer Confidence Surveys – As Of October 25, 2013

Doug Short had a blog post of October 25 (“Michigan Consumer Sentiment:  Lowest Level Since December 2012“) in which he presents the latest Conference Board Consumer Confidence and Thomson/Reuters University of Michigan Consumer Sentiment Index charts.  They are presented below:

(click on charts to enlarge images)

Dshort 10-25-13 - Conference-Board-consumer-confidence-index

Dshort 10-25-13 - Michigan-consumer-sentiment-index

There are a few aspects of the above charts that I find highly noteworthy.  Of course, the continuing subdued absolute levels of these two surveys is disconcerting.

Also, I find the “behavior” of these readings to be quite disparate as compared to the other post-recession periods, as shown in the charts between the gray shaded areas (the gray areas denote recessions as defined by the NBER.)

While I don’t believe that confidence surveys should be overemphasized, I find these readings to be very problematical, especially in light of a variety of other highly disconcerting measures highlighted throughout this blog.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1761.91 as this post is written

Current Economic Situation

With regard to our current economic situation,  my thoughts can best be described/summarized by the posts found under the 29 “Building Financial Danger” posts.

My thoughts concerning our ongoing economic situation – with future implications – can be seen on the page titled “A Special Note On Our Economic Situation,” which has been found near the bottom of every blog post since August 15, 2010.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1759.77 as this post is written

Durable Goods New Orders – Long-Term Charts Through September 2013

Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator.

For reference, below are charts depicting this measure.

First, from the St. Louis Fed site (FRED), a chart through September, last updated on October 25.  This value is 233,411 ($ Millions) :

(click on charts to enlarge images)

DGORDER_10-25-13 233411

Here is the chart depicting this measure on a “Percentage Change from a Year Ago” basis:

DGORDER_10-25-13 233411 Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Manufacturers’ New Orders:  Durable Goods [DGORDER] ; U.S. Department of Commerce: Census Bureau ; accessed October 25, 2013;

http://research.stlouisfed.org/fred2/series/DGORDER

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I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1756.65 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – October 25, 2013 Update

As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):

For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.

However, I do think the measures are important and deserve close monitoring and scrutiny.

The movement of the ECRI WLI and WLI, Gr. is particularly notable at this time, as ECRI publicly announced on September 30, 2011 that the U.S. was “tipping into recession,” and ECRI has reiterated the view that the U.S. economy is currently in a recession, seen most recently in these seven sources :

Other past notable 2012 reaffirmations of the September 30, 2011 recession call by ECRI were seen (in chronological order)  on March 15 (“Why Our Recession Call Stands”) as well as various interviews and statements the week of May 6, including:

Also, subsequent to May 2012:

Below are three long-term charts, from Doug Short’s blog post of October 25 titled “ECRI Recession Watch:  Weekly Update.”  These charts are on a weekly basis through the October 25 release, indicating data through October 18, 2013.

Here is the ECRI WLI (defined at ECRI’s glossary):

(click on charts to enlarge images)

Dshort 10-25-13 - ECRI-WLI 131.1

This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:

Dshort 10-25-13 - ECRI-WLI-YoY 3.1 percent

This last chart depicts, on a long-term basis, the WLI, Gr.:

Dshort 10-25-13 - ECRI-WLI-growth-since-1965 2.0

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1755.08 as this post is written

St. Louis Financial Stress Index – October 24, 2013 Update

On March 28, 2011 I wrote a post (“The STLFSI“) about the St. Louis Fed’s Financial Stress Index (STLFSI) which is supposed to measure stress in the financial system.  For reference purposes, the most recent chart is seen below.  This chart was last updated on October 24, incorporating data from December 31,1993 to October 18, 2013, on a weekly basis.  The October 18, 2013 value is -.686:

(click on chart to enlarge image)

STLFSI_10-24-13 -.686

Here is the STLFSI chart from a 1-year perspective:

STLFSI_10-24-13 -.686 1-year

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 24, 2013:

http://research.stlouisfed.org/fred2/series/STLFSI

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1751.94 as this post is written

Trends Of S&P500 Earnings Forecasts

S&P500 earnings trends and estimates are a notably important topic, for a variety of reasons, at this point in time.

FactSet publishes a report titled “Earnings Insight” that contains a variety of information including the trends and expectations of S&P500 earnings.

For reference purposes, here are two charts as seen in the “Earnings Insight” (pdf) report of October 18, 2013:

from page 18:

(click on charts to enlarge images)

CY Bottom-Up EPS vs. Top-Down Mean EPS (Trailing 26-Weeks) 

FactSet Earnings Insight 10-18-13 CY2013 and CY2014

from page 19:

Calendar Year Bottom-Up EPS Actuals & Estimates

FactSet Earnings Insight 10-18-13 CY2000-CY2014

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1745.00 as this post is written

S&P500 Earnings Estimates For Years 2013, 2014, And 2015

As many are aware, Thomson Reuters publishes earnings estimates for the S&P500.  (My other posts concerning S&P earnings estimates can be found under the S&P500 Earnings tag)

The following estimates are from Exhibit 12 of “The Director’s Report” of October 22, 2013, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts:

Year 2013 estimate:

$109.28/share

Year 2014 estimate:

$122.11/share

Year 2015 estimate:

$135.49/share

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1743.66 as this post is written